What is an Anti-Takeover Measure?
An anti-takeover measure is a precautionary strategy used by companies to avoid being bought by another company.
How Does an Anti-Takeover Measure Work?
For a myriad of reasons, a company may not want to be taken over. Thus, if management believes a takeover bid is likely to occur, there are a number of strategies or obstacles it may use to avoid being bought.
One such measure, known as the macaroni strategy, is when the company issues bonds that must be called at a high premium in the event the company is taken over. This can make the company prohibitively expensive to purchase. Another strategy, known as the Pac-Man strategy, would be for the takeover-threatened company to make a reactionary takeover bid against the purchasing company.
Why Does an Anti-Takeover Measure Matter?
For companies being purchased, the futures for management, employees, and investors can be in doubt as control of the company is relinquished to another authority (i.e. the purchasing company). In this respect, anti-takeover measures protect a company's autonomy and market competitiveness.